Correlation Between Sawit Sumbermas and Hero Supermarket

Can any of the company-specific risk be diversified away by investing in both Sawit Sumbermas and Hero Supermarket at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Sawit Sumbermas and Hero Supermarket into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sawit Sumbermas Sarana and Hero Supermarket Tbk, you can compare the effects of market volatilities on Sawit Sumbermas and Hero Supermarket and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Sawit Sumbermas with a short position of Hero Supermarket. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sawit Sumbermas and Hero Supermarket.

Diversification Opportunities for Sawit Sumbermas and Hero Supermarket

-0.88

Correlation Coefficient

Sawit Sumbermas  Hero Supermarket

Pay attention - limited upside

The 3 months correlation between Sawit and Hero is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Sawit Sumbermas Sarana and Hero Supermarket Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hero Supermarket Tbk and Sawit Sumbermas is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Sawit Sumbermas Sarana are associated (or correlated) with Hero Supermarket. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hero Supermarket Tbk has no effect on the direction of Sawit Sumbermas i.e., Sawit Sumbermas and Hero Supermarket go up and down completely randomly.

Pair Corralation between Sawit Sumbermas and Hero Supermarket

Assuming the 90 days trading horizon Sawit Sumbermas Sarana is expected to generate 2.68 times more return on investment than Hero Supermarket. However, Sawit Sumbermas is 2.68 times more volatile than Hero Supermarket Tbk. It trades about 0.18 of its potential returns per unit of risk. Hero Supermarket Tbk is currently generating about -0.09 per unit of risk. If you would invest  102,000  in Sawit Sumbermas Sarana on December 1, 2024 and sell it today you would earn a total of  74,000  from holding Sawit Sumbermas Sarana or generate 72.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Sawit Sumbermas Sarana  vs.  Hero Supermarket Tbk

Sawit Sumbermas Sarana

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sawit Sumbermas Sarana are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Sawit Sumbermas disclosed solid returns over the last few months and may actually be approaching a breakup point.

Hero Supermarket Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hero Supermarket Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Sawit Sumbermas and Hero Supermarket

The main advantage of trading using opposite Sawit Sumbermas and Hero Supermarket positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sawit Sumbermas position performs unexpectedly, Hero Supermarket can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Hero Supermarket will offset losses from the drop in Hero Supermarket's long position.

The idea behind Sawit Sumbermas Sarana and Hero Supermarket Tbk pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.